Krugman, Economics and the Next Civil War

When I was in graduate school pursuing a PhD in Economics, I was assigned to teach an Introductory Economics course for my assistantship requirements. I assigned my students twice-weekly readings of Paul Krugman's column in the New York Times editorial page. Of course, his column were political and I risked being accused of endorsing a Liberal agenda and swaying young minds, but Krugman was also an economist and his columns often gave a political perspective from an economic point of view. I was careful to focus in on the economic aspects of his columns and left the political portion open to discussion without criticizing or endorsing his opinions.

Upon leaving graduate school, the New York times began offering a paid service called Timeselect and Krugman's column was temporarily beyond my reach. I was ecstatic to learn the Timeselect was being cancelled a week ago and I could access Krugman's column and blog once more at the New York Times online page.

Krugman has a new book coming out with the same title as his blog "The Conscious of a Liberal." In the Introduction to his Blog, Krugman describes the growing inequities of income in the US. There is little doubt that the current disparities in income between the haves and the have-nots in our society - as well as around the globe - is troubling, to say the least. But Krugman appears to endorse a view that the recent trend, beginning with the Reagan administration, is a return to the previous days in America described as the Gilded age when robber barrens controlled the wealth of industry and had vast influence over political discourse in the US. Under this view, the depression era and post-war build-up of Government infrastructure supporting liberal agendas created an aberration in US history where wealth was distributed more equitably among the members of out society. This was the result of investment in public education, liberal legislation supporting unions and working families, and many other government programs and initiatives. Generally, I am in support of this view - but I also think it only tells part of the story leading to the solution of returning to more government run programs.

While income was distributed more evenly in American society during the great achievements of the post war liberal era, there was also a continuing migration from rural areas to urban and suburban areas as many Americans left income poor, yet self-reliant, households in rural America. This left vast rural areas in the control of large agricultural conglomerates with no ties to the people in these previously resilient communities.

These thriving rural communities may have been populated by households that were described as low income, but as my Grandma said of life on the farm, "We didn't have no money, but we were never hungry." The economies in these rural areas were kept aloft through the informal economy that could not be described with income. It can be better illuminated in the oownership records with many small farms owned by individuals with little income, still living pleasant and comfortable lives through their interconnected relationships and economic transactions with the community that were not pecuniary in nature. These transactions can be described as bartering, work-sharing, cooperatives, gifts and neighborliness. What makes the inequality in America today much more daunting than the inequality of the past is the reliance upon income over relationships amongst our neighbors.

In effect, although this postwar liberal era can be seen as a panacea through many lenses - the result of large government projects and initiatives - the liberal policies also contributed (and continue to contribute) to the loss of our rural communities and economies to the economic incentives of greater profits through the capture of economic transactions that previously were not part of the formal economy. Today we see the same trends in privatization in security, warfare, disaster relief and education. A closer look at Krugman's analysis might reveal a coup whereby liberal policies built up large government infrastructures through tax payer dollars enticing waves of Americans from rural areas to abandoned their communities and self-reliant lifestyles for the income supported lives of our modern era. Now the government (which is vastly subservient to corporate agendas) has began the process of selling (giving away) this infrastructure to the wealthy few - leaving in place a huge and much more chilling corporate/military infrastructure designed to serve the money interests while leaving citizens without income, property or the means to sustain themselves.

All of this leads to the current situation with the Eric Prince lead Blackwater along with other security firms. Imagine a future where the Generals are competing with CEO's for government funds. We may be witnessing the onset of the second civil war if congress begins the process of reducing these private mercenary companies. Eric Prince and his family have given vast sums of money to Republican campaigns with radical Christian and nonconservative agendas. He has given zero dollars to democrats. He is in control of the worlds largest private military and is being questioned by a democratic congress. It has the makings of a great Science fiction novel at the very least.

Your love affair with the "small farms" and how they survived the depression, and into the early to mid 50's is based on a lack of true experience.

And I don't mean to dishonor your Grandmother, but old people have a strong tendency to remember past hardships rather fondly... while enjoying current comfort.. (I walked six miles to school every day, in the snow and it was up hill both ways!)

Not having money meant that they could not leave the farm and placed them at the mercy of the small merchants and the "company store."

And it was the economic boom of the post WWII era that brought factories and unions where there had been farms and sharecropper.

This, coupled with a technology expansion in farming equipment, destroyed the requirement for both sharecroppers and the "hired man." John Deere was more reliable and less costly.

I share your belief that we must honor our past, and that we must insure our children have a knowledge of how to grow, raise, harvest and slaughter our own food, but having lived it, I do not want to return to the past.

ok, who is this guy, and what has he done with the real jim? that sound you hear is ice cracking in hell, because jim and i are in agreement.

peaches, if the small family farm had actually been a self-sustaining enterprise, the compulsion to leave wouldn't have existed. it wasn't, because the top soil had been blown away, hence, the term "dust bowl".

even before the economic disaster of the 30's, the small farm had already started giving way to larger, non-family operations; with the industrialization of farming, economies of scale made the large operation far more cost efficient than the small farm could possibly hope to ever be. when dealing with fungible goods, cost efficiency is what makes profit.

the only reason so many small farms continued to exist is government handouts; take away the farm subsidies, and the small, family run farm will almost certainly cease to exist, because it isn't economically viable otherwise.

Jim, you don't dishonor my grandparents and I agree with you that we all tend to remember our hardships of the past with a sense of nostalgia that can be mistaken for fondness. What I did not say in this diary was something my grandmother also told me. I wrote this after driving my grandma to my grandpas gravesite this past July.

"You wouldn't even believe it, Andy. The wind, it was blowing. Where there were fences was a mound of dirt and the pigs and cows would walk right over the fences. People were starving in the cities. We had food. We always had food. But, Dad worked so hard. He would have to go to the county and pick up feed for the cows. Just a little handful a day - enough to keep them alive, and then in the winter he had to repay them for the feed by working all day putting gravel down on the roads. He found a trucker to take the horses to a field near Granite Falls, because they had some rain, see? And, then we heard that one of the horses had sleeping sickness. So, they sent him home and he died. Dad worked so hard...

Farming is hard work, there is no doubt and the risks associated with weather, yields and crops can lead to even worse hardship in a short while.

But, the question I have is whether or not we have really made our lives easier in today's modern world and where we are going. CP makes the point about subsidies and he is correct. The family farm is not viable or sustainable when exposed to world markets without some sort of government subsidy. The question is whether or not we want family farms to be sustainable and viable because a global free market does not. Especially one that is regulated by world trade organizations and free trade treaties where a farmers are restricted in labeling his or her product as being free of GMOs, hormone free, locally grown, etc. So, the question is whether or not we want to have food that is healthy and soil that is not depleted over time like what happened in the dust bowl years and continues to happen today throughout America due to the free market sustainable, but not ecologically long-term sustainable industrial agricultural practices.

I know from where both of you are arguing and I freely admit to being nostalgic for times long past. I have embraced ideas that can be described as Luddites, because I know longer have faith in free markets, science, big government, or technology to be either sustainable or to lead to conditions where democracy can thrive. In fact, as my later diary on power suggest, I believe free markets and new technologies are leading to the exact opposite. There are a litany of reasons for holding such views that can be categorized under environmental, technological, militarism, imperialism, or economics. To me it is intuitive and as a parent I have come to believe I have a responsibility to teach my children the skills and practices necessary to feed themselves through cultivating the land, despite it not being a pecuniary sustainable career choice. It just might save their lives and a few other peoples. Then again, someone might drop a bomb on them.

A good friend of mine has deep roots in the "fingers" of Virginia. Most of his family moved north save for one of his uncles who took over the family farm. He. over the years, turned it into a huge success and added a cannery to the operation.

His kids have no interest in farming. They are interested in becoming doctors and lawyers going to Harvard and Yale. What came with the success is that the kids do not want to be associated with dirt.

I will probably talk economics more in a future diary, but it really is this simple. He's a writer - a poet - with no background in the field of economics, but his logic is right on.

Forget about profit and think about community, thrift, savings and debt. Don't let the Greenspans of the world confuse you into believing there is something natural and free about global free markets - there's not. The financial world of debt financing is complex, but sound, thrifty, pragmatic economics is really very simple.

My man - Ventura.

In the interests of brevity, we'll confine our examples to banks. Until well into the 20th century, most banks in the former U.S. were locally owned and operated. A merchant, farmer, or skilled laborer, using measurable collateral (which might include the banker's knowledge of his or her character), applied for a loan at reasonable interest, then spent that loan locally, benefiting the community. The bank, profiting from the interest, in turn loaned more money locally, also benefiting the community. This was, more or less, honest commerce, which is, in its essence, trade - a means by which work was done and goods and services were made available. Mostly, these goods and services were not superfluous; they concerned the basics - food, tools (in its most inclusive meaning), clothing, shelter. Quality was a value. Materials were durable, and objects of all kinds - from typewriters, say, to houses - were built to last. Work, too, was a value. To do even humble tasks well and responsibly was generally considered worthy of respect. If this portrayal sounds too rosy, we need only remember that every human system from time immemorial has been rife with excess, greed, pettiness, exploitation, and cruelty; this one was no exception. Nevertheless, this form of commerce, at its heart, involved supplying what is necessary to an orderly society, and necessity makes for a kind of baseline of sanity.

Time passed; things changed. How they changed is all too well-known; no need to go into detail here. Suffice it to say that, by the end of the 20th century, the bank was no longer locally owned. It had become a "branch," as it was called, of a much larger tree. The health of the community was no longer necessary to the health of the bank. (We are using banks only as a convenient example; the same became true of many enterprises.) Commerce was still important, for life had to be sustained, but speculation became more profitable. A citizen applied for a loan, but it was no longer the same loan. The banks "packaged," as the saying went, many loans and sold those loans to larger entities; these entities, in turn, used the packaged loans as collateral for grander investments and speculations. In this system, banks (and other enterprises) profited from the debt of the community. It was in the interest of banks (etc.) to keep the community in debt. The more debt the community incurred, the more the banks (etc.) could package and sell that debt to larger entities, and the more the larger entities could prosper by speculation. Gradually, speculation replaced commerce as the central source of wealth.